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Hedge Funds’ Net Long Positions in WTI Contracts Hit More Lows


Dec. 4 2020, Updated 10:53 a.m. ET

Hedge funds 

The CFTC (U.S. Commodity Futures Trading Commission) released its weekly “Commitments of Traders” report on July 29, 2016. The government agency reported that hedge funds reduced their net long positions in WTI (West Texas Intermediate) crude oil futures and options contracts. Net longs hit a five-month low in the week ending July 26, 2016. The trend might continue as crude oil prices are down 20% from 2016 highs. For more, read part one in the series.

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Hedge funds’ net long positions in WTI contracts fell by 36,248 contracts to 120,556 contracts for the week ending July 26, 2016, compared to the previous week. This was their lowest level since March 1, 2016. They hit their highest level since May 12, 2015, at 249,000 contracts in the week ending April 26, 2016.

Commercial and non-commercial traders 

The CFTC divides traders into two categories: commercial and non-commercial. Hedge funds are non-commercial traders. Oil producers and consumers are commercial traders. Commercial traders use the futures and options markets for hedging activity to offset crude oil price volatility.

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Open interest  

The CFTC added that open interest for WTI crude oil futures and options contracts rose for the second time in the last five weeks. It increased by 73,826 contracts to 2,447,227 contracts between July 19 and July 26.

The open interest for WTI crude oil futures and options contracts hit an all-time high of 2,717,000 contracts in the week ending February 9, 2016.

Impact on energy stocks and ETFs 

Volatility in crude oil prices affects oil and gas producers’ revenues such as Cobalt International Energy (CIE), Denbury Resources (DNR), and PDC Energy (PDCE). It also impacts ETFs such as the PowerShares DWA Energy Momentum ETF (PXI), the VelocityShares 3x Inverse Crude Oil ETN (DWTI), and the Direxion Daily Energy Bear 3x (ERY).

In the final part of this series, we’ll take a look at some crude oil price forecasts.


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